Transcript 50 Good Reasons Not to Waive Federal Transportation Law

50 61 Good Reasons Not to
Waive Federal Transportation
Law and Bill of Lading Terms
by Contract
Guest Speaker: William Bierman,
Moderator: Henry E. Seaton, Esq.
Delta Nu Alpha Webinar
April 15, 2008
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Format is issue presentation followed by open question
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61 Good Reasons Not to Waive Federal
Transportation Law and Bill of Lading Terms
I.
II.
III.
Introduction
What is Waiver? 49 U.S.C. §14101(b)
What gets thrown out by a blanket waiver?
A. Carmack (49 U.S.C. §14706)
1. National uniformity and consistency of statute
2. Predictability v. state law variance
3. Uniform treatment of special and consequential
damage issue
4. Removal to federal court, 28 U.S.C. §1337
5. Venue flexibility for deciding and situs of loss, 49
U.S.C. §14705(a)
6. Forum non-conviens, right to transfer to convenient
venue, 28 U.S.C. §1391
7. Burden of proof for negligence transferred to shipper
8. Document presumption of good order and case law lost.
6
9.
Consignee duty to accept shipment unless practically worthless
and to mitigate damage loss
10. State law liability standard inconsistent with cargo insurance coverage
11. Joint line apportionment-49 USC 14706
12. Liability imposed on connecting line carriers, issuance of bill of lading not
required-49 USC 14706(1)
13. Full actual value
14. Released evaluation
15. Preemption trumps state law causes of action
B. Written Claims Requirements
16. Regulations establish standards of what constitutes a claim-370.3(c)
17. Minimum claims requirements established-370.3(b)
18. Adjustment and response procedures-deadlines, free astray
certifications-370.5 and 370.7(c)
19. Administrative Ruling 65 and 128-payment of freight
charges/dispute resolution of claims vs. offset
C. Uniform bill of lading or standard bill of lading provisions waived
20. Bill of lading is contract of carriage/waiver results in shipping documents
becoming simple receipt for goods-VICS bill contains no terms and
conditions
21. Loss of release rate notice and inadvertence clause, opportunity to
declare higher rate
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22. Loss of C.O.D. provision to require collection upon
delivery
23. Special instruction block for special service terms
24. Identity and definition of the party-who is the carrier in
possession and control
25. Identify payor of charges/is shipment prepaid or collect
or third party
26. Accurate description of commodity including hazmat
certificate
Back Side Terms and Conditions Omitted from Contract
27. Reasonable dispatch defined
28. Act of God exception
29. Act of public enemy
Common Law Exceptions
Trumped by Waiver
30. Authority of law
31. Inherent vice
32. Act or omission of shipper
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33. 9 month rule for filing claims, statement in writing
required-49 U.S.C. 14706(e)(1)(a)
34. 2 years after denial to file suit limitation, stated in
writing49 U.S.C. 14706(e)(1)
35. Carrier lien for freight charges confirmed-49 U.S.C.
80109, 49 U.S.C. 13707
36. Provision for warehouse statement of status upon
wrongful rejection
37. Salvage provisions/non-perishable
38. Salvage provisions/perishable
39. Deduction of transportation charges from salvage after
sale
40. No liability for items of extraordinary value
41. Hazmat protocol/shipper duty to identify
42. Payment of freight charges/liability of consignor and
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consignee (UBOL Section 7)
43. Instrumentalities of Transportation-Define the Parties
– Consignor-49 USC 80101(2)
– Consignee-49 USC 80101(1)
– Broker-49 USC 13102(2), 49 CFR 371
– Motor Carrier-13102(14)
– Not defined – 3PL, logistics company or
“transportation service provider”
44. Pitfalls to broker of waiving statutory definition
– Loses statutory definition as arranger, easily becomes
“provider” entering the liability loop and chain of
custody vs. the mischief of “service provider” status
45. Shipper pitfalls
– Loses standard as “member of shipping public” and
public utility analysis – prime contractor in supply
chain
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46.
Broker recordkeeping and production of payment
records waived-49 CFR 371.3
47.
Misrepresentation provision separating broker from
carrier-49 CFR 371.7
48.
Anti-rebate prohibitions waived-49 CFR 371.9
49.
Broker responsible for discharging shipper’s
payment duties-371.10
50.
Prohibition against broker commingling of funds and
requirements of segregation waived-371.11
51.
Basis for “constructive trust” under statutes and
regulations waived
Miscellaneous statutes
52.
Off-Bill discounts, truth-in-billing-49 USC 13708
53.
Overcharge, undercharge and duplicate payment
regulations wiaved-49 CFR 378
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54.
55.
56.
57.
58.
59.
60.
61.
Statutory time limits for identifying overcharges and
undercharges-180 day rule, 49 USC 13710
Broker’s bond registration and bond requirements
waived
Shipper load and count provisions which result,
presumption on shortage and damage claim waived49 USC 80113
Possessory lien and duty to deliver-49 USC 8010949 USC 13707
Self-help provision, 49 USC 14704
Anti-lumping statute, 49 USC 14109
Payment liability, 49 USC 13706, 49 USC 13707,
Credit Regulation at 49 CFR 377
Statute of limitation for collecting freight charges
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What is a Waiver?
Answer:
Pursuant to 49 U.S.C. 14101(b):
“If the shipper and carrier, in writing, expressly
waive any or all rights and remedies … for
transportation covered by contract, the [services]
provided under the contract shall not be subject
to the waived rights and remedies and may not
be subsequently challenged on the grounds that
it violates the waived rights and remedies.”
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What are the consequences of waiving federal
“rights and remedies” and standard bill of lading
terms and conditions?
Answer:
It takes 10 to 20 pages of fine print to
address the issues you just excluded and in
the details the carrier often loses.
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What Important Items Get
Trumped By Overly Broad Waiver?
Answer:
(1) Carmack Amendment for cargo claims
(2) Statutory definitions and duties and
obligations
(3) Uniformity and Predictability
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What is Lost by Allowing
Waiver of Carmack?
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1. Consistency
The complete waiver position leaves
contract interpretation up to the differing
laws of the 50 different states and state
law judges who may have little familiarity
with federal transportation matters and
who are simply not as sophisticated as
the Federal Courts.
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2. Predictability
There is a plethora of federal Carmack
precedent/state law because of Carmack
and preemption is sparse
18
3. Uniformity
As will be shown in this presentation, the Federal
Statutes, regulations and bill of lading terms
provide a balanced and uniform system for
determining the duties and obligations of the
parties, regardless of the forum or the location of
the cause of action involved. Carmack is a
contract remedy. If left to state “tort” law,
measure of damages is not confineable.
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4. Removal
Federal Court jurisdiction lost:
(a) 28 U.S. §1337
(b) Removal is important tool
(i) Better judges
(ii) Well settled precedent
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5. Venue Flexibility
49 U.S.C. §14705(d) allows suit at origin,
destination or over-route (where the loss
occurred or where witnesses are
located)
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6. Federal Forum Non-conveniens
Federal forum non-conveniens permits
transfer if more convenient federal court
vs. homer provisions (e.g. California for
loss in New Jersey)
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7. Burden of Proof
• Under Carmack, carrier negligence is not an issue
• Waive Carmack burden of proof under state law
becomes an issue
8. Document Presumption of Good Order
• Ease of determining liability/document presumption –
effect of clear delivery receipt
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9. Duty to Mitigate Loss

“Practically worthless” test versus “sole
discretion standard”
“PRACTICALLY WORTHLESS” PRODUCT
Your duty as the consignor and consignee to mitigate
damages and to accept the product unless it is practically
worthless is well established by case law. See Chicago &
North Western R. Co. v. Union Packing Co., 514 F. 2d 30
(8th Cir. 1975); F.J. McCarty Company v. Southern Pacific
Co., 428 F. 2d 690 (9th Cir. 1970); Sunset Motor Lines, Inc.
v. Lu-Tex Packing Co., 256 F. 2d 495 (5th Cir. 1958).
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10. Insurance Coverage Problem
When Carmack is Waived
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Shipper’s sole discretion to mitigate
damages is not insurable
Cargo insurer left with no salvage or
adjustment
Insurers deny claims/institute declaratory
judgments
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11-12. Joint Line Liability/
Apportionment and BOL
Requirement
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Origin or destination carrier may be sued
and must then seek contribution from
carrier at fault
Issuing of bill of lading not necessary
Carrier defined in bill of lading as “any
party in possession under contract.”
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13. “Full Actual Value” Limitation Lost
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Case and precedents
Fair market value
Warehouse-to-warehouse vs. destination
market value
Waiver results in “meeting of minds and
state law issues”
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14. Released Evaluation/Declared
Value Protocol Lost
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Release Rates
•
Parties can agree to limit carrier liability in return for
reduced rates through bill of lading notice and carrier’s
rules tariffs which are provided for. See 49 C.F.R.
§14706(c)
Notice
Rates to value options
Election/inadvertence provision
Established precedent
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15. Preemption

When claims rules are waived, what is lost?
•
•
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Necessary to trump state law causes including tort
with punitive and consequential
Necessary to trump broadly worded indemnity
Air freight / Indianapolis example
Restating Carmack standard after waiving
statute
Will not get you back to Federal Court or
preempt state law
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Schneider
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Air waybill limits liability to $100,000.
Forwarder pays $692,000 claim and
turns to Schneider under shipper/carrier
contract for “indemnity”
No contract limitation, no Carmack or
bill of lading limitation
Schneider has to pay $692,000
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Written Claim Requirement §370
16. What constitutes a claim?
•
Bad order report, exception report is not enough §370.3(c)
17. Establishes minimum requirements:
•
•
•
Identify shipment - §370.3(b)(1)
Claim for sum certain - §370.3(b)(3)
Requires documentation of amount - §370.3(c)
•
•
•
Deadline for response - §370.5
Free astray shortage certification - §370.7(c)
Processing of salvage - §370.11
18. Establishes adjusted procedures
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19.
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Contracts often waive traditional separation
of freight charges vs. freight claims
Freight charges are due, owing and uncontested
Claims may be contested as to liability or
amount
Administrative Rulings 65 and 128 (challenged
but not abandoned)
Waiver opens door to unilateral offset
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Contrast

Pay freight charges and adjust claims
with indemnity + offset = no mitigation,
no insurance proceeds and cash flow
interruption
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Offset leads to insurance dispute
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Carrier’s insurer deprived of investigation
and participation in salvage
Policies do not pay full “earned freight”
amount
Carrier intimidated to sue shipper
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20. Bill of Lading as a Contract of
Carriage is Waived

The bill of lading contract terms and
conditions bind all the parties
Texas Pacific Railroad v. Leatherwood, 250 U.S. 470 (1919)
"The bill of lading is the basic transportation contract
between the shipper-consignor and the carrier; its terms
and conditions bind the shipper and all connecting carriers."
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Bill of Lading (cont.)


Basic bill of lading terms traditionally
track rail bill proscribed by statute but
truck transport requires simple receipt
only (49 CFR §373)
Uniform bill of lading or standard
truckload bill of lading is often not
incorporated in shipper and broker
contracts and VICS bill of lading
conspicuously has no back side
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24. Identity
of Carrier
23. Special
Instructions
25. Primary
Payor
26. Accurate
Description
21. Release
Rate Notice
22. C.O.D.
Provision
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39. Deduction of
Charges from
Salvage Proceeds
27-32. Common
Law Exception
40. Extraordinary
27. Reasonable
Dispatch
33. 9 Month Rule
14706(e)(1)(a)
34. 2 years/1 day
Statute of Limitation
14706(e)(1)
Item Exclusion
41. Hazmat
Obligation-Shipper
42. Consignor/
Consignee Liability
for Freight Charges
Confirmed
35. Carrier Lien
Preserved
36. Warehouse on
Rejection/Lien
37. Salvage NonPerishable
38. Salvage
Perishable
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27. Reasonable Dispatch Defined

"Unless arranged or agreed upon, in writing, prior to
shipment, carrier is not bound to transport a
shipment by a particular schedule or in time for a
particular market, but is responsible to transport with
reasonable dispatch. In case of physical necessity,
carrier may forward a shipment via another carrier."
For further discussion see Schwartz v. Atlas Van Lines, 976 P. 2d 145 (Wash. App. 1999); 99 Fed. Carr.
Cases at ¶84092. The U.S. Supreme Court in Chesapeake and Ohio R.R. v. Martin, 283 U.S. 209 (1931)
considered proper construction of the phrase “reasonable time for delivery” and concluded that “the phrase
should be construed to mean that the time “to transport and make delivery of a shipment in the ordinary
course of business, in light of the circumstances and conditions surrounding the transaction.”
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28-32. Common Law Exceptions Defined
vs. Contractual “Force Majeure Clauses”
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Act of God
Public enemy/seal relevance
Authority of law
Inherent vice
Act or omission of shipper
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33. Nine Month Rule
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

Must be incorporated in tariff or bill of lading
49 U.S.C. 14706(e)(1) [A carrier may not
provide by rule, contract, or otherwise, a
period of less than 9 months for filing a claim
against it under this section]
If not included, state law governs
• No notice and up to five years
• Washington State case
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34. Statute of Limitations


49 U.S.C. 14706(e)(1)
Again, must be enforced by tariff or bill of
lading, standard truckload bill of lading,
and uniform bill of lading – have 2 years
after denied.
• (E.g. – Washington State bankruptcy case – 5
years late)
42
35-36. Carrier’s Lien on Rejected Freight


Liability converted to warehouseman
Storage in public warehouse subject to
lien
43
37-38. Salvage Sales Terms

Non-perishable
• Can be sold at public auction after 15 days
notice to consignee

Perishable
• Carrier has discretion to sell at best
advantage
44
39. Deductions from Salvage Proceeds

Carrier may deduct from proceeds
(contract terms denying salvage rights
and requiring free storage)
45
40. No Liability for Items of
Extraordinary Value

Allows carrier to exclude high value
shipments from liability by tariff
• (e.g. When used machinery is actually a
missile launcher)
46
41. Shipper and Agent Risk for Disclosing
Explosive or Dangerous Goods


Hazmat protocols are important and bills of
lading serve often as only “contractual”
document binding actual consigner of goods
FAA, TSA issues are unresolved/major issues
in air freight industry
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42. Payment of Charges/Consignor

Section 7 – Consignor primarily liable
unless executed
See Hawkspere Shipping Company, Ltd. v. Intamex, S.A., 330 F.3d
225 (4th Cir. 2003); National Shipping Co. Of Saudi Arabia v. Omni
Lines, 106 F.3d 1544 (11th Cir. 1997); Strachan Shipping Co. v.
Dresser Industries, Inc., 701 F.2d 483 (5th Cir. 1983); Contship
Container Lines, Inc. v. Howard Industries, Inc., 309 F.3d 910 (6th Cir.
2002); Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513
F.3d 949 (9th Cir. 2008)
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43. Waiver destroys important
definitions of instrumentality of
transportation leading to confusion
over roles and duties of brokers,
carriers and freight forwarders
49
Important Definitions –
Instrumentalities of Transportation
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Consignor – 49 U.S.C. 80101(2)
Consignee – 49 U.S.C. 80101(1)
Broker – 49 U.S.C. 13102(2), 49 C.F.R. 371
Motor Carrier – 49 U.S.C. 13102(14)
Not defined: 3PL, logistics company, or
“transportation service provider”
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44. The pitfalls of waiving broker
regulations for the broker:

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Broker quickly becomes construed as provider rather than
arranger
Broker is mistakenly named on bills of lading as carrier
The door is opened for broker liability for cargo claims
The door is opened for “contractor/subcontractor”
respondeat superior, negligent entrustment,
master/servant, etc., state law claims in accident suits
naming broker
Broker asked to assume contractual duties beyond
statutory requirements. See Schramm v. Foster, 2004
U.S. Dist. Lexis 16875 (D.Md. August 23, 2004); See
“Vicarious Liability Travels Up the Supply Chain” (DNA
Webinar, February 2008).
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Property Brokers

Like an insurance agent, real estate
broker or stock broker, a property broker,
under the statute, brings together a
willing buyer and seller, owes both a duty
of due diligence, but accepts the ultimate
contractual obligations of neither.
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Contrast to Carrier Definition


A carrier is defined as a “provider” of
transportation and has independent and nondelegable safety duties. See 49 C.F.R.
13102(14).
Federal safety regulations impose duties
exclusively on motor carriers, not upon brokers
or shippers. See 49 C.F.R. 385-394.
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45. Shipper Pitfalls



Shipper loses shipping public defense
through own interjection of state law and
state law principles.
State law construction analysis obscures the
“shipper liability for negligent hiring ends with
the retention of a carrier the FMCSA certifies
as safe” defense.
Shipper’s 25 page contract becomes cannon
fodder for plaintiff’s bar.
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Shipper and carrier lose important
protections against broker malfeasance
46.
47.
48.
49.
50.
Recordkeeping and production of payment records
to shippers and carriers-§371.3
Misrepresentation - Broker must not directly or
indirectly represent itself as a carrier-§371.7
No rebating-§371.9
Broker responsible for transmitting payments-§371.10
Accounting requirements – no commingling-§371.11
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51. Constructive Trust Argument
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Broker regulations establish enforceable
duties/constructive trust
Major credit and collection issue is the
role of the broker
Why should any carrier allow waiver?
ACI, Blue Thunder, Computrex, et al.
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52. Off Bill Discounts


49 U.S.C. 13708 requires invoices to
show discounts and credits
Protects shippers from agent
malfeasance, and consignees from
“prepay and add” fraud
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53. Billing Disputes


49 U.S.C. 13710 imposes 180 day rule
for overcharge and undercharge
Waiver vitiates important time limit (e.g.
$6 million dispute – post audit traps)
58
54. Overcharge, Undercharge
and Duplicate Payments




49 U.S.C. 13710
49 C.F.R. 378
Establishes procedures for resolution
without litigation or offset
The $5 million state law issue and the
post-audit contract!!
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55. Broker Bonds - Registration


Eliminates important verification tool
De minimis bond but important
resources
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56. Bill of Lading Act



Non-liability for non-receipt, misdescription, and improper loading
Shipper load and count – 49 U.S.C.
80113
Shifts count and upset in transit
presumption of major importance
because of HOS and spotted trailer, seal
issues/TSA and “One Fine Pickle”
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57. Duty to Deliver and
Possessory Lien



49 U.S.C. 80109
The legal basis for on-hand notice,
possessory lien and deduction of
warehousing and transportation for
salvage
49 USC 13707
62
58. Self-Help Statute


49 U.S.C. 14704
Grants federal cause of action for carrier
and broker violations
59. Anti-Lumping Statute
 49 U.S.C. 14109
 Prevents lumper shakedowns
63
60. Payment Liability

49 U.S.C. 13706
• Consignee liable for freight unless gives
notice of agency only

49 U.S.C. 13707
• Allows for payment and delivery unless
otherwise agreed
64
61. Statute of Limitations for
Collection of Freight Charges




49 U.S.C. 14705(a)
Freight charge – 18 months after
charges accrue
Settled the “filed rate” battles of the ’80s
Compare to 5 or 10 year state statutes of
limitation
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End – Q&A
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